The discussion of the CPI groups below is ordered in terms of their significance to the change in All groups index points (see tables 6 and 7).

FOOD (+2.3%)

The rise in food prices was largely due to fruit (+20.5%), soft drinks, waters and juices (+3.2%), take away and fast foods (+0.9%), restaurant meals (+0.9%) and snacks and confectionery (+0.8%). The only offsetting price fall of any significance was in vegetables (-5.3%).

Increases in distribution and packaging costs were again cited by a number of respondents as contributing to price rises in a number of food categories.

The rise in fruit prices reflected strong price increases for a number of fruit. Price rises for bananas, which began following Cyclone Larry, continued with the average price recorded for September quarter being 45% higher than the average recorded for June quarter. Melons, apples and pears also showed rises. The rise in fruit contributed 0.48 index points to the increase in the CPI in the September quarter.

The fall in the price of vegetables was associated with plentiful supplies of salad vegetables and green leafy vegetables.

Over the twelve months to September quarter 2006, food prices rose 9.9%. The main contributors to the increase were fruit (+92.1%), vegetables (+9.3%) and takeaway and fast foods (+3.6%). The only offsetting fall was in poultry (-3.3%).

HOUSING (+1.2%)

All categories of housing recorded price rises this quarter. Main contributors to the increases were property rates and charges (+5.6%), rents (+1.0%), water and sewerage (+4.7%) and electricity (+2.1%).

A number of rises were due to the annual review of prices by State and local government authorities and utility providers. Property rates and charges rose in all capital cities with increases ranging from 4.2% in Brisbane to 17.2% in Canberra.

All capital cities with the exception of Sydney and Melbourne recorded a rise in house purchase in the September quarter. In Sydney and Melbourne bonuses were offered by project home builders in an attempt to attract buyers.

Through the year to September quarter 2006, the housing group rose 3.3%. This rise was mainly attributable to house purchase (+2.9%), rents (+3.4%) and property rates and charges (+5.6%). Annually, house purchase rose across all cities except Melbourne (-1.6%), with Perth (+14.7%) and Darwin (+13.0%) showing the strongest rises.

HOUSEHOLD CONTENTS AND SERVICES (+1.3%)

Household contents and services rose +1.3% this quarter, the largest quarterly rise since June quarter 2001 (+1.7%). With the exception of major household appliances (-1.9%), all categories of household contents and services rose this quarter with other household supplies (+2.9%), furniture (+1.4%) and child care (+3.3%), being the most significant. The rise in other household supplies was largely due to an increase in household paper products (+6.7%). Furniture rose due mostly to price rises in lounge room furniture (+2.1%).

Child care prices are calculated on a net basis, after accounting for government subsidies. General fee rises this quarter, particularly in family day care, exceeded the increase in subsidy, leading to an increase in the net price of child care in most cities. Only Canberra and Hobart showed net falls.

Over the year to September quarter 2006, the household contents and services group rose +2.4% with child care (+14.4%) and other household supplies (+4.7%) being the most significant contributors.

RECREATION (+0.8%)

The rise in the recreation index was mainly due to domestic holiday travel and accommodation (+1.2%), other recreational activities (+2.4%) and overseas holiday travel and accommodation (+1.4%). The major offsetting price fall was in audio, visual and computing equipment (-1.5%).

The rises in domestic overseas holiday travel and accommodation reflected the impact of sustained higher fuel prices being passed onto consumers. Increased fuel prices also applied to overseas holiday travel and accommodation, along with seasonal demand in USA and Europe.

The fall in audio, visual and computing equipment was mainly due to continuing falls in prices of computers and televisions and strong competition between retailers.

TRANSPORTATION (+0.4%)

With the exception of automotive fuel (-1.1%), all categories in transportation rose this quarter, with motor vehicles (+0.8%), other motoring charges (+2.8%) and urban transport fares (+2.5%) being the most significant.

Automotive fuel prices rose in April (+7.7%), May (+2.4%) and June (+2.5%), then fell in July (-0.5%), August (-0.1%) and September (-8.9%), leading to the overall fall of -1.1% between the June and September quarters 2006. The automotive fuel expenditure class contributed -0.08 index points to the change in the All Groups CPI in June quarter 2006 and +0.66 index points to the through the year change.

The following graph shows the pattern of the average daily price behaviour for unleaded petrol for the eight capital cities over the last fifteen months.

The rise in motor vehicles was mainly due to the introduction of new models, with little discounting, replacing heavily discounted runout models. Increases to State Government fees and parking fees were the main factors affecting other motoring charges. There were increases to urban transport fares in all cities except Hobart and Darwin, with Adelaide (+8.2%) being the largest.

Through the year to September quarter 2006, the transportation group rose 4.6%, primarily due to a 10.5% rise in automotive fuel.

ALCOHOL AND TOBACCO (+0.5%)

Three of the four components in the alcohol and tobacco group rose this quarter with contributions from tobacco (+1.4%), beer (+1.0%), and spirits (+0.9%) being partly offset by wine (-1.4%).

The rises in tobacco, beer and spirit prices were mainly due to the effect of the increase in Federal excise and customs duty from 1 August. However, competitive pressures resulted in widespread discounting in beer, particularly in the earlier part of the quarter.

Through the year to September quarter 2006, the alcohol and tobacco group rose 3.2%.

FINANCIAL AND INSURANCE SERVICES (+0.3%)

The rise in financial and insurance services in the September quarter was due to increases in insurance services (+2.2%) and other financial services (+0.8%), offset by falls in deposit and loan facilities (-0.6%).

The rise in insurance services was mainly due to increases in house insurance and house contents insurance, partly offset by a fall in motor vehicle insurance. The rise in other financial services was due to increased stamp duty payments on real estate transfers.

The deposit and loan facilities component aims to measure the total cost of the financial service and therefore covers both those fees and charges levied directly on households and those paid indirectly via differences in interest rates on loans and those on deposits ('interest rate margins'). A small decrease occurred this quarter in home loan products.

Through the year to September quarter 2006, the financial and insurance services group rose 2.4%.

HEALTH (-0.7%)

The fall in health costs in September quarter 2006 was due to a fall in pharmaceuticals (-5.0%) more than offsetting rises in dental services (+1.5%) and the net cost of hospital and medical services (+0.4%).

The fall in the net cost of pharmaceuticals was due to a combination of small falls in gross prices plus the cyclical effect of the Pharmaceutical Benefits Scheme, as the number of people accessing benefits rises throughout the calendar year.

The rise in dental services was due to general price rises in all cities except Hobart.

The small rise in hospital and medical services was due increases in doctors' fees overshadowing the impact of increased Bulk Billing ratios.

Over the year to September quarter 2006, the health group rose +5.0%, primarily due to increases in hospital and medical services (+5.7%) driven by health insurance costs, dental services (+5.8%) and pharmaceuticals (+3.0%).

EDUCATION (-0.8%)

Education fell in the September quarter, due entirely to a fall in tertiary education (-2.2%) reflecting the impact of the removal of compulsory student union fees.

Universities differed in their approach to this change. Some charged an upfront annual fee, while others have chosen to continue to provide these services for the remainder of the current year free of charge. Some universities introduced voluntary fees to cover some or all of the services previously provided for by these fees.

Through the year to September quarter 2006, the education group rose +4.9%, mostly due to a +6.9% rise in secondary education fees.

TRADABLES AND NON-TRADABLES

The non-tradables component of the CPI, which represents approximately 58% of the CPI and includes goods and services whose prices are largely determined by domestic price pressures, rose 1.0% in the September quarter. Within non-tradables, the services component rose 0.9%, mainly due to property rates and charges, rents, insurance services and domestic holiday travel and accommodation. Offsets were provided by tertiary education and deposit and loan facilities. The non-tradables goods component also rose 0.9% with water and sewerage, and electricity being the main contributors. A fall in poultry provided the only offset.

The tradables component (see table 8) of the All groups CPI rose 0.8%. This component includes goods and services whose prices are largely determined on the world market and represents approximately 42% of the weight of the CPI. The main contributors to the increase were fruit, motor vehicles and tobacco. Falls in vegetables, pharmaceuticals and automotive fuel provided the most significant offsets.

Through the year to September quarter 2006, tradables rose 4.4% and non-tradables rose 3.6%. This compares with rises of 4.8% and 3.4%, respectively, for these components through the year to June quarter 2006.

CAPITAL CITIES COMPARISON

ALL GROUPS

All Groups: Percentage change from previous quarter

At the All groups level, the CPI rose in all capital cities in the September quarter 2006, with the increases ranging from 0.7% in Melbourne, Hobart and Canberra to 1.7% in Darwin.

Melbourne's result was driven mostly by a lower than average increase in housing, combined with falls in health, clothing and footwear. The lower result for Hobart was largely due to that city recording falls in transportation, larger than average falls in education and health, and smaller than average rises in food and housing. Canberra's result was largely due to falls in transportation, combined with larger than average falls in education and health and smaller than average rises in food.

The higher result for Darwin was driven by higher than average rises in recreation, housing and alcohol and tobacco.

Through the year to September quarter 2006, the All groups CPI rose in all capital cities with the increases ranging from 3.3% in Hobart to 4.9% in Darwin. Price increases in Perth were also high (+4.8%). The higher result for Perth was largely due to a 9.3% rise in housing, nearly triple the 3.3% increase for the weighted average of eight capital cities. Darwin also recorded a rise for housing (+8.3%) well above the national average.

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